Salary Packaging A Car To Pay Less Tax

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  cypher67 on 21/05/2014 - 13:50

  +2

  Bat-Mobile at $600 a month, gotta get me one of those!

  I recently ended a lease car through my company and my mates also have done the same. I personally wouldnt do it again. It dramatically reduced my house borrowing potential, I felt trapped to said company, heaps less cash flow and at the end of the 3 year lease I had to fork out a hefty sum to keep the car because I couldnt justify getting a new lease. I did the sums at the end to see if I was ahead or behind taking into account taxes saved and all that. I was about even, i didnt do the KMs required to make it worth it. With the new scheme there is a flat FBT meaning less KMs means less FBT, but if you do bulk KMs you will be worse off.

  Leases are for you if your doing large quantity of KMs, my mate does wollongong to Sydney and back each day for work, end of the lease he hands back a car thats done 250,000 km which essentially wouldnt be worth much and gets a new one for the continued monthly fee.

  Someone that cant manage their finances like when rego,insurance or repairs come around you have no savings to pay for it, having a flat sum taken out of your pay including fuel is nice to have.

  Someone that must have a new car every few years, takes the hassel out of selling a car and you get fleet prices on the new car. Its fairly stress free.

  In summary, Do the math, if the tax break gets you below a tax brackets then its a no brainer. I didnt like being tied to the rules etc of the contract. Hope some of this helps

  • 

    daewoo on 21/05/2014 - 14:19

    I personally wouldnt do it again. It dramatically reduced my house borrowing potential, I felt trapped to said company, heaps less cash flow and at the end of the 3 year lease I had to fork out a hefty sum to keep the car because I couldnt justify getting a new lease.

    This ^

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  Wampus on 21/05/2014 - 16:15

  I've got a lease on my current car. I agree with the above comments but it does bring down your taxable income considerably if that's a major point for you. Positives are that everything car-wise is taken care of within the lease, and the majority is taken from pre-tax income so a part of your lease payment would have gone to the tax office instead. Negatives for me have been higher charges than if you shopped around and just bought a car, that you don't own the car at the end of your lease, and you're sort of trapped in there.

  Also for me, the company I work for changed novated lease companies twice, and my lease moved with them, and it was a major pain in the backside to fill out all the paperwork.

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  mskeggs on 21/05/2014 - 16:28

  higher charges than if you shopped around and just bought a car
  This is the main issue for me.
  I had a company car in the UK where the tax rules are different and it made sense, but while it was lovely to have the lack of hassle and a brand new car, it was very costly compared driving around a car you buy outright used.
  If you work for a charity that can package existing expenses, it may be worth it, but I would never get a lease on a new vehicle.

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  Geewhizz on 22/05/2014 - 04:09

  We first looked into Leasing when our car was dying and we couldn't really afford to replace it. We did the sums and found that by leasing, the lease payments on a new Mitsubishi Lancer would have been the same as repayments on a $10 000 loan to buy a second hand car, and we would have had all the running costs on top of that. Bit of a no braner for us, really.

  When that 5 year lease expired we took the car on for another 2, and our out of pocket expenses on that subsequent lease are less than $120 per fortnight, so less than a single tank of fuel per week. We don't live in the city, and we do have to travel, so we rack up a lot of km without having to try.

  It's really a matter of getting a car you can afford, and if you are happy with your current car you can lease that, provided it will be 8 years old or less by the end of the lease period. The way this works is they buy it from you, and you lease it back from them.

  • 

    dy4me on 04/06/2014 - 12:11

    +1

    A novated lease doesnt have to be on a new car. A lot of lease companies are happy for you to lease a car with a market value of 10k or above

    • 

      Geewhizz on 05/06/2014 - 05:54

      +1

      That's right. As mentioned, the car simply needs to be no more than 8 years old at the end of your lease. I don't think they really care what the value is.

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        daewoo on 05/06/2014 - 12:11

        No more than 5 years old at the end of the lease when going through SG Fleet.